A recent report highlights that since February, price increases for traditional fiberglass electronic fabric have accelerated, confirming earlier views that production capacity shifting toward AI electronic fabric has created a supply gap in conventional fabric. The price hikes are boosting profits for leading fiberglass companies, while demand for AI electronic fabric remains strong. The tight supply of traditional fabric, driven by production shifts, reflects robust demand for AI specialty fabrics. By 2026, AI specialty fabrics are expected to enter a phase of volume and profit realization.
Key observations include: In February, traditional electronic fabric saw accelerated price increases, coupled with an announcement from a major supplier about reduced supply of E-glass related products, further fueling expectations of a supply shortage. The tightening market is attributed to two main factors: 1) Unexpectedly large price hikes in traditional electronic fabric, with quotes for 7628 fabric rising significantly compared to previous minor adjustments; 2) A supplier's announcement citing strong demand for low-dk materials leading to reduced E-glass production.
The shortage is largely due to low inventory levels resulting from the "production shift effect," with leading companies holding only about two weeks of stock—well below the normal one to one and a half months. Thinner fabric types like 2116 and 1080 are even more constrained. Despite planned capacity expansions in traditional electronic fabric by 2026, including projects by major producers, inventory pressure is expected to remain low, supporting continued price increases beyond the Chinese New Year.
Leading companies in traditional fabric production, such as China Jushi and KB LAMINATES, stand to benefit significantly from the price trends. The tight supply of traditional fabric and the strong demand for AI electronic fabric are two sides of the same coin, with AI specialty fabrics poised for substantial growth in 2026. Key segments include: 1) CTE fabric, which has seen rising prices driven by AI chip and consumer electronics demand; and 2) Low-dielectric fabric, with strong growth prospects linked to advanced packaging and AI hardware developments.
Overall, 2026 is anticipated to be a year of volume and profit realization for AI electronic fabrics. Companies with comprehensive product portfolios, leading customer certifications, and cost advantages are likely to outperform. Recommended stocks include China Jushi (600176.SH), KB LAMINATES (01888), and others in the sector.
Risks include slower-than-expected expansion in AI downstream demand and delays in domestic production capacity increases.